Opec production cuts compliance could push oil price to $70
![](https://www.cityam.com/wp-content/uploads/2019/12/1069391002.jpg?w=742)
The combination of strong compliance of Opec and its allies with production cuts and a US-China trade deal could push the price of Brent crude to $70 by the second quarter of 2020.
According to a note from Bank of America Merrill Lynch, last week’s agreement to curb production by an additional 500,000 barrels a day could continue to drive prices up.
Read more: Global oil prices fall as Chinese exports shrink again in November
Prices rose 1.4 per cent higher at the conclusion of Friday’s Opec+ meeting in Vienna, where the deal was ratified.
However, Bank of America Merrill Lynch said that strict compliance from countries like Iraq is necessary if the price rise is to continue.
Analysts noted that Iraq’s output currently averages around 200,000 barrels a day over previous allowances, with the latest deal reducing this by a further 50,000 barrels.
“Based on historical precedent, we remain sceptical that countries like Iraq will deliver on their cuts,” BoA Merrill Lynch said.
Last week’s meeting also saw Saudi Arabia pledge a voluntary extra 400,000 barrels per day, taking total production cuts to 2.1m.
The decision is part of a systemic attempt from Opec and key allies such as Russia to offset the impact of the US shale gas boom.
Saudi Arabia was also understood to be keen on the cuts to ensure a favourable market for last week’s record-breaking Saudi Aramco initial public offering.
The restrictions only last until March, with no action promised for beyond.
Read more: Opec and allies expected to deepen oil production cuts
Oil prices fell this morning after China’s exports of goods and services shrank for the fourth month in a row.
The fall came despite data showing China’s crude imports jumped, showing how deep market jitters are over the trade war between the US and China that has limited global growth and oil demand.